Saturday, January 31, 2009

"This site may harm your computer", blah blah blah. I almost didn't read the whole story.Here's how it ends, from the NYT's The Lede blog:

...The company is not known for glitches. But Saturday’s is not the first in the last 10 days. Recently, Google Maps had a software glitch that advised drivers trying to get to different points within Staten Island, specifically zip codes 10302 and 10308, to take a 176-mile detour to Schenectady. The Staten Island Advance ran a story on the road trip directions headlined “Strudel in Google’s noodle.”

The glitches in Google Maps and Google search were unrelated Mr. Stricker said. As for Saturday’s search engine failure, he added:

“Our web search is extremely reliable and that’s why when an interruption occurs, even if it’s for a matter of minutes — for Saturday morning, people notice it.”

A previous version of this entry included a reference to former Vice President Al Gore, which has now been removed.

Front page editorial from the Red Bluff Daily News (The Voice of Tehama County since 1885):

The once great state of California will likely become a national disgrace tomorrow.

While the federal government races to revive a failing economy, leaders in Sacramento wallow in finger-pointing and self-righteous bluster. Their failure to pass even an interim solution to the state's $40 billion deficit by Sunday's deadline would exponentially deepen this fiscal crisis, forcing the treasury to default on its obligations and worsening the financial plight of families and taxpayers.

Californians should be furious. We are. That's why the Daily News and other California Newspaper Partnership newsrooms are taking this rare step of placing the editorial board's opinion on the front page. Others must raise their voices until the political cost of inaction in Sacramento becomes higher than the perceived value to lawmakers of clinging to principles that grim economic reality has rendered meaningless. Gov. Arnold Schwarzenegger and the Legislature must adopt a new budget now. The people should demand it.

Sunday, the state will stop paying some of its bills and start issuing IOUs. It will stiff taxpayers due refunds, students depending on Cal Grants to stay in school and contractors who have performed work. If the days without a budget lengthen, economic havoc will spread like a virus, and the state's bad faith and credit will infect cities, counties and schools.

State Controller John Chiang warned Friday that he will begin withholding tax refunds and vendor payments on Sunday or else California will lose its ability to borrow money.

"Nobody will lend to the state of California today because we have a $42 billion deficit and we have no sound plan by the legislature or the governor," Chiang said at an economic luncheon in Dana Point.

Chiang said he has been forced to make painful decisions to help keep the state afloat while the legislature fights over the budget.

"On Sunday, February 1, I will have to start deferrals," he said. "It is too late for the governor and the legislature to take significant action to remedy the fact that I have to start the deferral process.">>>MORE

Thought you couldn't start a company during a recession? These enterprises made it big by doing just that.It might seem counterintuitive to start a new business when the economy is in the dumps. But a recession can actually be the ideal time for launching a company. In fact, many well-known and successful organizations were born during an economic slump.

Why do these companies succeed? Usually it's because the founders recognized a market need and filled it. Identifying that need — whether it’s related to entertainment, travel or even streamlining how businesses operate — is the key to any thriving enterprise, regardless of the economic climate in which it begins. The following major corporations made it big during recessions by doing just that.

Hyatt Corp. opened its first hotel’s doors at the Los Angeles International Airport during the Eisenhower recession (1957 to 1958). The chain rose to worldwide fame in the following decades and now operates more than 365 hotels in 25 countries with premium services such as wifi hotspots.

Burger King Corp., with its flame-broiled burgers, is another recession startup. The company began in 1954 when James McLamore and David Edgerton opened a Burger King restaurant in Miami, Fla. During another recession in 1957, the company introduced its successful signature burger — the Whopper. Today, the company operates more than 11,100 locations in 65 countries.

IHOP Corp. is another star from the Eisenhower recession. The first restaurant in the now national chain opened its doors July1958 in Toluca Lake, Calif. Owners Al and Jerry Lapin were at the helm of the fast growing company, which began franchising just three years later. Today, there are more than 1,300 locations across the U.S.

The Jim Henson Company was created by famed puppeteer Jim Henson in 1958. Henson's business was responsible for some of the best-known puppet characters of all time including Miss Piggy, Kermit the Frog and Elmo. Today, the privately held company is managed by Henson's children and continues to thrive by creating popular kids-friendly shows and movies.

LexisNexis is a research hub for the law, media and more. The company, originally a government contractor, began its LexisNexis computerized legal research service during the 1973 oil crisis that rocked the country into steep economic slump. The now Web-based service is used in 100 countries by individuals in law, government, education and business....And nine more.

By Friday early evening, contract talks between Royal Dutch Shell PLC and the United Steelworkers appeared to slow over healthcare and safety issues, increasing the possibility that 24,000 oil refinery workers nationwide could strike Sunday.

The threat of a strike comes at a time of declining fuel demand, but the union is seeking to boost workers’ pay and benefits after several years in which oil companies’ profits soared.

Because of sinking demand for gasoline and other refined products and large inventory, a strike isn’t expected to mean a disruption in gasoline supply or a price spike, said Tom Kloza, chief analyst at the Oil Price Information Service. “I don’t think we’ll be paying $2.50 or $3 a gallon this spring unless we have a strike that’s like the French Revolution,” he said. The last nationwide strike by refinery workers was in 1980 and lasted about three months....MORE

Germany and Britain called on Friday for a global economic watchdog with strengthened powers to prevent rather than react to financial crises that can spiral into worldwide recession.

Cooperation amongst international financial institutions has failed to ward off the worst financial crisis in decades and a new charter should be forged, German Chancellor Angela Merkel told the World Economic Forum in this Swiss ski resort.

"This may even lead to a U.N. Economic Council, just as the Security Council was created after the Second World War," she said....MORE

Davos, Switzerland - With the issues of climate change and the global economic crisis coming to a head simultaneously, world leaders have focused on tying the two together, and businessmen Saturday were trying to find ways to make money from a green economy. Europe's carbon credit trading program, in its second phase, is seen as being on the path to putting a price on pollution and creating a market that would allow for profit making. "Pricing and cost will force a lot of adjustment for people," said Pierre LaGrange, an alternative energy investor, but added that a trading program "could only work if it were globally accepted."He said Europe's politicians have expressed interest in setting more aggressive carbon reduction goals, if the rest of the world got on board. With the 192 countries planning to meet in December in Copenhagen, in attempt to reach a new global climate deal, engaging with developing nations will be crucial to the outcome of the process. Capping carbon emissions would force producers who exceed their permitted output amounts to buy credits from companies who have not, creating new jobs in the new market and also reducing carbon outputs by attaching a price to it. To get people trading across borders, Lars Josefsson, from the large European power producer Vattenfall, suggested treating the credits in each country - which would each likely introduce its own system - like currency exchanges, which let people with one brand of cash do business with someone with another. "This is a pragmatic way to go about globalizing cap and trade markets," he said, referring to the markets to cap or limit carbon emissions by trading them. Ultimately, LaGrange said, the caps on emissions will have to be extended to the user, and not only to the energy producer. "The place to start is behaviour change," said US Congressman Brian Baird. "The goal should be 20 per cent reduction in 20 weeks. Just walk through your daily life and see how much you can reduce.""Energy efficiency is very doable, and 50 per cent of the solution," said Nic Frances, who runs a company which focuses on reducing power consumption. "It's what we do in our homes, domestic energy efficiency.">>>MORE

Meanwhile, from the BBC, three days ago:

EU calls for global carbon market

The European Commission has called for a global carbon trading market as part of a plan to tackle climate change.

The EU is already committed to expanding its Emissions Trading Scheme (ETS), but now it is urging other industrialised countries to join in....MORE

And yesterday:

Recession threatens carbon trading

A crucial scheme to control greenhouse gases is under threat due to the recession.

Under the Kyoto Protocol adopted in 1997, since ratified by 183 countries, industrialised nations agreed to reduce their emissions of gases such as carbon dioxide (C02) which cause global warming.

Among the measures introduced was the European Carbon Trading System, whereby governments put a price on the amount of greenhouse gases that can be emitted by any company....

...Price freefall

It seemed like a market solution to global warming in Europe, but initially many of these permits were given away for nothing.

Now, as recession bites, industries like steel, cement and glass may be polluting less, but only because they're producing less.

So companies are desperately selling off the carbon credits they no longer need to bolster their faltering balance sheets

That has led to a big drop in the market value of carbon permits, and as the right to pollute becomes cheaper, there is less incentive for companies to stop polluting.

Mark Lewis, a carbon analyst at Deutschebank, told World Business News that the recession has cast a spotlight on the frailties of emissions trading...MORE

The US Dollar Index (USDX) has been very choppy for the last 2 months. Two weeks of sharp declines drove the index from 88 to below 80 between December 4 and December 18.

This period covered the year-end general correction on global markets: stocks rebounded, the US Dollar fell back and commodities soared. It was actually only a short-term retracement after a tough second half of 2008 that damaged many investors.

Typically, short-term retracement and correction phases end on technical key points. That’s exactly what happened here with the USD Index. The price action corrected in December to the 61.8% level (point C on the chart) following the 4-month rally from mid-July and mid-November (points A and B).

From the low of December (at 78.775), the index has rebounded by almost 10% to reach 86.2 last Friday. As explained in our last update (Money Morning of November 26), we use a system based on a multi-dimension oscillator to anticipate the price action, the Chande Momentum Oscillator (CMO).

Used to detect overbought and oversold conditions, but also trendiness, divergences, pattern recognitions and chart formations, the CMO often also acts as support and resistance levels....MORE

Irish economist Eddie Hobbs told a group of students studying in Trinity that if his daughter was leaving college soon he would tell her to emigrate.

For students in Ireland who are leaving college soon he advised them to leave the country as the economy is in a very serious condition and there are very few employment opportunities. He recommended going to Canada or Australia as they are likely to have opportunities in renewable energy technologies as the world emerges from a global recession.

He said, "If I was coming our of college today I would carve out a career in energy."

Mr Hobbs said that he believed in the theory of peak oil. He explained that as oil rich countries develop they are more likely to consume the oil they produce rather than sell it to other countries due to the growing demand of their own citizens. This means the price of oil will go up for oil importers. This will spark further investment and research in renewable energy technologies as countries try to become energy independent.

Mr Hobbs said that the new US president 'Gets it'. Obama said that he would make the US energy independent within ten years focusing on oil exploration and renewable energy technology.

"Barak Obama gets it. As early as August he made it clear that energy is one of his main priorities. Again in his acceptance speech this was his second focus after the economy," said Mr Hobbs.

Mr Hobbs does not believe the world is on the cusp of depression as some economists have claimed. "The US will shift heaven and earth to get the economy going.">>>MORE

Friday, January 30, 2009

On Thursday, Texas utility regulators selected nine companies to build portions of the nearly $5 billion-worth of transmission to better connect existing and anticipated generating resources in the western part of the state to the large consumer load centers in the east, central and southeast parts of the state. (Most of those existing and anticipated generators are wind powered, but so far as I know nothing in the rules would prevent a company from building a coal plant in west texas and getting access to the grid.)

This map posted on the PUCT website shows the approximate assignment of lines to companies. Note that one project in the McCamey area was assigned to STEC, but is not shown on the map. Click on the image for a larger view.

But as the skeptics on the stock point out, to buy it here is a bet on improvement in the credit markets. As I noted yesterday, SunPower said it expects 2009 revenue of $1.6 billion to $2 billion, with profits of $2.20 to $2.80 a share. The company said that reaching the high-end of the revenue and earnings ranges will depend on improved access to the project financing markets. And it also said that first-half performance will be “materially affected by seasonal factors and the continuing impact of the credit crisis.”

Weirdly, the company did not give any guidance at all on the first quarter.

While the bulls rule the day, thanks to the strong earnings - and perhaps some panicky short covering - the bears make a reasonable case:

Jesse Pichel, an analyst with Piper Jaffray, today repeated his Buy rating on the stock this morning, but notes that “financing remains the biggest swing for SPWR’s guided revenue range and the industry is very much a call on credit in our opinion.” In other words, buying solar stocks here is a bet that currently tight credit market conditions are going to loosen....MORE

Update: I started typing just before the close, with the DJIA at 7980-something. In the last couple minutes of the trading month it got back to 8000.86.See: Phantasmagorical Pistachio translation, below.

Original post:God help me, I'm leaning to the bull side.

The theory's name is a poke at the "There were two guns on the grassy knoll" conspiracy views of President Kennedy's assassination. In a tinfoil hat nutshell, it states, "There is a they, and they know".

I call the thought experiment The Grassy Knoll Theory of Investing.This name tends to insure that I am left alone at parties.

That post gets into the thought experiment aspect of the theory.This lengthier than usual prologue was triggered by the action in the market today. This morning I told one of my partners that the market would close the day under 8000.

One of the core tenents of the theory is that things are not what they seem, that a down day on a Friday gives Ma and Pa investor all weekend to listen to gloom and doom from the talking heads with resulting anxiety, then worry, then fear.

Closing below a big fat round number makes it all the better. I mean if I were manipulating markets, I am manipulating perceptions. If I wanted to shake some stock loose for a February run to the upside, I'd want to get my position on as cheap as possible. As one of my childhood heroes said:

"I can distribute more stock on upticks than I can on down"*-E.H. Harriman, railroad man and Wall Street pro.

The opposite is also true, you can accumulate more stock on downticks than you can on up.

The foregoing is a tongue-in-cheek comment but (and this is a big but) there is truth in all jokes.Let's see what February brings. In the meantime I'll check volume and money flows, upticks and downticks, MACD and Mac Daddy.

And remember the term "Phantasmagorical* Pistachio"**.

*Main Entry:

phan·tas·ma·go·ria

Pronunciation:

\(ˌ)fan-ˌtaz-mə-ˈgȯr-ē-ə\

Function:

noun

Etymology:

French phantasmagorie, from phantasme phantasm (from Old French fantasme) + -agorie (perhaps from Greek agora assembly) — more at agora

Date:

circa 1802

1: an exhibition of optical effects and illusions2 a: a constantly shifting complex succession of things seen or imagined b: a scene that constantly changes3: a bizarre or fantastic combination, collection, or assemblage

Dresdner has some interesting charts out today, depicting bubbles — and lots of them. Specifically in housing and equities in the UK, US and Japan.

...You can see from the charts that a characteristic of post-2000 housing bubbles in the US and UK is their lack of correlation with equity markets. While house prices doubled and tripled, equity markets (with the exception of the BRICs) barely kept up with 1999/2000 highs. As Dresdner puts it (our emphasis):

In other words, over the past twenty years the world has experienced serial bubbles in equities and housing, in contrast to Japan’s 1980s/90s experience of synchronised bubbling and de-bubbling....MORE

It may not quite be official, but La Niña, a natural cooling of the eastern equatorial Pacific Ocean, has arrived. Here are the full details from NOAA (.pdf file).

As La Niña conditions will likely persist through at least early spring we can make some predictions about what winter conditions will be like in Texas this year.

The graphic below shows the average temperature anomaly from November through March when La Niña persists in the Pacific Ocean.

NOAA

As we can see, the average temperature is about 1 degree warmer for southeast Texas. Perhaps more interesting is La Niña's effect on precipitation, especially as we're already having such a dry winter.

NOAA

Here we can expect to be about 5 inches below our normal rainfall totals, and we seem to be on course for that. We were 1.27 inches below normal rainfall in November, 2.01 inches below in December, and we're already 2.84 inches below normal this month....MORE

Now that taxpayers have become financiers, we have a right to know where the money is going. In search of organizations with the curiosity and resources to help figure that out, we trolled the Internet for good, easily available bailout information and came up with several sites worth looking at.

You can get charts describing the allocation of bailout money from a variety of sources. Some are easier to find than others, and we’ll leave it up to the reader to figure out what it means that the WSJ has a quick link for the Super Bowl but not the bailout.

But even after you find them, charts will only get you so far.

If you are looking to understand the big picture, you should go first to organizations that focus specifically on tracking the bailout. Not only do they piece together information from a variety of sources, saving you the trouble, but a few also do their own snooping around.

A good place to start is Open the Government, an organization devoted to greater government transparency in general, and with a specific page on the bailout. The page is a good launching pad because it compiles a lot of information—from government organizations, news outlets and watchdogs—as well as providing a calendar of relevant dates. In the spirit of common cause, Open the Government also links to other bailout watchdog groups...MUCH MORE

The market is set for a 7% drop in January, not boding well for the rest of the year, if one believes the old adage.

According to research from Quantitative Analysis Service, the month of January tends to predict the direction the market will take for the year accurately 65% to 75% of the times.

"That's not an impeccable record," says Ken Tower, market strategist and senior vice president at the firm. "But, along with April, it definitely has a better track record at predicting the year than any other month in the year."...

...Voodoo 'Monthanomics'?

Some market strategists who rely on technical analysis use January's success at predicting market action, not because they believe in astrology, but simply because it's worked historically....MORE

The Guam line is a ref to the fact that Guam's caucuses have predicted the Presidential election since 1980 i.e. "As goes Guam so goes the nation" . Barack Obama had 62% of the vote, beating Hillary Clinton in a "Guamslide".It is itself a play on Richard Nixon's quote "As goes Ohio, so goes the nation".Someone else probably said "As goes Virginia, so goes the nation" back in 1789.(Or Rhode Island? -ed.)

A quick overview, from USA TODAY (I wish they had done a pictograph* sidebar):

Alternative energy is taking it on the chin this recession, with solar and wind developers canceling projects and laying off workers. But a far more obscure slice of the energy sector is hotter than ever: the electricity grid.

How hot?

President Obama has made modernizing the nation's vast power network a key piece of his $819 billion economic stimulus plan, passed by the House Wednesday. Last weekend he called for the installation of 3,000 miles of transmission lines to carry renewable energy to population centers and 40 million smart electric meters in homes. The House bill sets aside $11 billion to help finance the investments.

Obama's endorsement of a sweeping upgrade to the century-old grid is jolting an industry already on a roll. Top power companies and lawmakers lately have called for an up to $1 trillion nationwide backbone electric grid.

Meantime, utilities and venture-capital firms are bucking the credit crisis and pouring billions of dollars into the "smart grid.">>>MORE

Shipping investor Nobu Su plans to offer his fleet of 20 supertankers to speculators who want to store oil and bet they can sell it later in the year for a profit.

Su’s Taipei-based company, TMT Co. Ltd., will lease out its 2 million-barrel vessels at below-market prices in return for a share of any profit his customers make on the trade in oil. His fleet, able to hold enough crude to supply Europe for two days, is available for immediate hire, he said....

...The average price of storing 2 million barrels of oil on a tanker is about $57,500 a day, depending on the duration of the contract, the quality of the ship and its location, according to data from London-based shipbroker Galbraith’s Ltd. That works out at 86 cents a barrel a month. Traders also have to pay insurance and financing costs....MORE

SunPower(SPWRA) shares are higher this afternoon after the company posted Q4 revenue of $401 million and non-GAAP profits of 70 cents a share, beating the Street consensus of $396.8 million and 57 cents.

The solar company said it expects 2009 revenue of $1.6 billion to $2 billion, with profits of $2.20 to $2.80 a share, and production capacity of more than 450 megawatts. The Street has been looking for $1.89 billion and $2.66 a share; If you use the midpoint of the guidance range, the forecast would be a bit short of consensus....MORE

Econ 10: Tax what you want less of, don't tax what you want more of.
Tax and rebate 100%.
You won't find two more different publications than Reason and CounterPunch, yet here they are, both making arguements against Cap-and-Trade. We also have a special guest appearance from James "Gaia Hypothesis" Lovelock. First up, the headliner from Reason:

Yesterday, the Goracle (as Dana Milbank of the Washington Post affectionately refers to him), otherwise known as the former Vice-President, Nobel Peace Laureate, and Oscar-Winner Al Gore, testified before a Senate committee on the dangers of man-made global warming. Among other things, Gore told the committee:

If Congress acts right away to pass President Obama's Recovery package and then takes decisive action this year to institute a cap-and-trade system for CO2 emissions - as many of our states and many other countries have already done - the United States will regain its credibility and enter the Copenhagen treaty talks with a renewed authority to lead the world in shaping a fair and effective treaty. And this treaty must be negotiated this year. Not next year. This year.

Gore was talking about the United Nations' global warming treaty negotiations that are supposed to be wrapped with a new agreement at the end of this year in Copenhagen, Denmark. Currently, the treaty negotiations aim basically at extending the cap-and-trade model of the earlier Kyoto Protocol. People who are concerned about global warming should seriously rethink their support of cap-and-trade schemes. As the Guardianexplains, Europe's emissions trading scheme (ETS) is very profitable for some corporations:...MORE

Shortly after the Inauguration, President Obama and his new EPA head Carol Browner received a thank-you letter from over 325 conservation-oriented organizations, and within it were flowing words of praise for candidate Obama’s pledge of support for a doomed-to-fail cap and trade carbon economy and associated spending to “safeguard wildlife and natural resources from the impacts of global warming”.

A number of the groups behind the letter are the usual suspects; they sold their environmental souls years ago, if they ever had them at all. So it is no surprise to look down the list and find the likes of The Nature Conservancy, Environmental Defense Fund, Trout Unlimited, and the National Parks Conservation Association.

What is surprising is that these ‘conservation’ corporations were able to dupe so many other local, regional, and national organizations into supporting such a fraudulent approach to the problem of climate change.

A soulless organization like The Nature Conservancy pays more attention to its revenue streams and the whims of the corporate entities behind the dollars than it does to global warming, the pillaging of our national forests, and the levels of pollution in our rivers and lakes. So of course it supports the creation of a new false economy that has great potential to generate cash flow for the stakeholders behind it....MORE

With his 90th birthday in July, a trip into space scheduled for later in the year and a new book out next month, 2009 promises to be an exciting time for James Lovelock. But the originator of the Gaia theory, which describes Earth as a self-regulating planet, has a stark view of the future of humanity. He tells Gaia Vince we have one last chance to save ourselves - and it has nothing to do with nuclear power

Your work on atmospheric chlorofluorocarbons led eventually to a global CFC ban that saved us from ozone-layer depletion. Do we have time to do a similar thing with carbon emissions to save ourselves from climate change?

Not a hope in hell. Most of the "green" stuff is verging on a gigantic scam. Carbon trading, with its huge government subsidies, is just what finance and industry wanted. It's not going to do a damn thing about climate change, but it'll make a lot of money for a lot of people and postpone the moment of reckoning.

I am not against renewable energy, but to spoil all the decent countryside in the UK with wind farms is driving me mad. It's absolutely unnecessary, and it takes 2500 square kilometres to produce a gigawatt - that's an awful lot of countryside.

What about work to sequester carbon dioxide?

That is a waste of time. It's a crazy idea - and dangerous. It would take so long and use so much energy that it will not be done....MORE

That's about as diverse a set of links as you're likely to find on one page.

Hundreds of thousands of people took to the streets in France today to protest at President Sarkozy's handling of the global economic crisis in what unions described as the country's biggest demonstrations for 20 years.

"This is a social event of major importance", said Bernard Thibault, leader of the communist Confédération Générale du Travail union, which said 1.5 million had participated in marches in provincial cities and thousands more in Paris.

"It's not a passing outburst of anger. There will be more."

Earlier, French business was put in hibernation as millions of workers stayed at home to avoid the nationwide public sector strike....MORE

For a bit of Dark Ages flavor:

Return of wolves worries farmers

Grey wolves have colonised the uplands of central France for the first time in 70 years, confirming fears that the wild animals are spreading from their Italian forest habitat....MORE

Finally back to the Times:

Switzerland slaps ban on menace of naked German ramblers

Switzerland is to introduce new laws to tackle a growing menace from Germany that is threatening to spread to the country’s pristine Alpine meadows – naked walkers.

In autumn last year groups of nature lovers started exploring mountain regions while wearing only rucksacks and walking shoes. Local police made arrests but soon realised that they had to let the naked walkers go with an apology as there was no law against nude mountaineering....MORE

David Leonhardt has a lengthy article that looks interesting. I won't get to it until the weekend but thought I should post before I forget.From the New York Times Magazine:

The economy will recover. It won’t recover anytime soon. It is likely to get significantly worse over the course of 2009, no matter what President Obama and Congress do. And resolving the financial crisis will require both aggressiveness and creativity. In fact, the main lesson from other crises of the past century is that governments tend to err on the side of too much caution — of taking the punch bowl away before the party has truly started up again. “The mistake the United States made during the Depression and the Japanese made during the ’90s was too much start-stop in their policies,” said Timothy Geithner, Obama’s choice for Treasury secretary, when I went to visit him in his transition office a few weeks ago. Japan announced stimulus measures even as it was cutting other government spending. Franklin Roosevelt flirted with fiscal discipline midway through the New Deal, and the country slipped back into decline.

Geithner arguably made a similar miscalculation himself last year as a top Federal Reserve official who was part of a team that allowed Lehman Brothers to fail. But he insisted that the Obama administration had learned history’s lesson. “We’re just not going to make that mistake,” Geithner said. “We’re not going to do that. We’ll keep at it until it’s done, whatever it takes.”

Once governments finally decide to use the enormous resources at their disposal, they have typically been able to shock an economy back to life. They can put to work the people, money and equipment sitting idle, until the private sector is willing to begin using them again. The prescription developed almost a century ago by John Maynard Keynes does appear to work.

But while Washington has been preoccupied with stimulus and bailouts, another, equally important issue has received far less attention — and the resolution of it is far more uncertain. What will happen once the paddles have been applied and the economy’s heart starts beating again? How should the new American economy be remade? Above all, how fast will it grow?

That last question may sound abstract, even technical, compared with the current crisis. Yet the consequences of a country’s growth rate are not abstract at all. Slow growth makes almost all problems worse. Fast growth helps solve them.

As Paul Romer, an economist at Stanford University, has said, the choices that determine a country’s growth rate “dwarf all other economic-policy concerns.”>>>MORE

Xcel is not kidding around when it comes to efficiency and alt. energy. From ENOC's point of view, it's a great validation and they can be pretty sure the checks will clear.From MSNBC:

EnerNOC, Inc., a leading developer and provider of clean and intelligent energy solutions, today announced that it has entered into an eight-year contract with Public Service Company of Colorado, an Xcel Energy company, to provide up to 44 megawatts of demand response capacity in Xcel Energy's Colorado service territory. The contract allows EnerNOC to begin delivering capacity as soon as it is able to sign up customers.

"We conducted a rigorous analysis of service and technology providers and concluded that EnerNOC's capabilities and strong track record of delivering demand response capacity to utilities will enable us to roll out a cost-effective, innovative offering to benefit our customers," said Fred Stoffel, Xcel Energy.

Under this contract, EnerNOC will enable and manage a network of commercial, institutional, and industrial facilities to reduce electricity demand during periods of peak demand or high wholesale electricity prices. EnerNOC will install its technology - free of charge - at each participating facility and provide year-round payments to participants for being "on call." When Xcel Energy calls a demand response event, EnerNOC will dispatch its network to reduce non-essential energy usage and collect real-time data to verify that each facility is achieving its energy reduction goals....MORE

Lord Stern, he of the 2006 report and carbon financier/advisor IDEACarbon had my favorite quote at the big Bali global warming conference:

"This (climate change) is much too important to leave to environment ministers"-Sir Nicholas Stern

to Finance Ministers basking in Bali

He is more facile than I when it comes to really big numbers (I often forget a comma when writing out multiple trillions or quadrillions).From the Financial Times:

The world needs a “green” stimulus of around $2,000bn to pull it out of recession, Lord Stern of Brentford, the climate economist, has said.

Lord Stern, author of the eponymous review in 2006 that laid out the economic case for fighting global warming, said that by spending about a fifth – $400bn – on green technologies the world could begin a path of sustainable growth.

However, he warned climate scientist and campaigners in a speech at Leeds University that there were only a few weeks to convince governments to back the idea.

“The arguments need to be made now because they need to get into the budgets being prepared by governments in the northern hemisphere which are announced in the spring. If we wait we will not succeed in giving a push to get it out of this recession. It will be too late.”

In an earlier interview, Lord Stern said that advances in science since he published his report had revealed the situation to be more alarming still. The concentration of greenhouse gases in the atmosphere should be kept lower than he recommended, requiring faster and deeper cuts in emissions.

Rather than the range of 450-550 parts per million of carbon dioxide equivalent, he said it would need to be capped at 500ppm. The level now stands at 430ppm and is rising at 2-3ppm a year.

The fiscal stimulus should provide work for unemployed builders fitting insulation in homes and fund low-carbon technologies such as research on installing equipment to capture carbon from power plants and store it underground, he said.

Lord Stern, who advises José Manuel Barroso, the president of the European Commission, said that he was cautiously optimistic that the world could clinch a deal on reducing greenhouse gas emissions at a meeting in Copenhagen this year.

He said the election of Barack Obama was of “huge importance” and if the US president took decisive action to match his words on cutting emissions it could convince India and China to agree long-term reductions.

“It has given a great boost to the prospects in Copenhagen and . . . the rest of the world will respond. They have to see actions as well as words,” he said. “There was a great hunger for American leadership.”

He was launching the Centre for Climate Change Economics and Policy, a £5m joint initiative of the London School of Economics and Leeds University, which he chairs. Munich Re, the German reinsurance giant, has put in £3m and commissioned research on the risks and opportunities for its business from climate change.

...More relevant to the American markets are a couple Fed papers, the first of which is astounding for its frankness:

Monetary Policy When the Nominal Short-Term Interest Rate is Zero....This paper also examines the alternative policy tools that are available to the Federal Reserve in theory, and notes the practical limitations imposed by the Federal Reserve Act. The tools the Federal Reserve has at its disposal include open market purchases of Treasury bonds and private-sector credit instruments (at least those that may be purchased by the Federal Reserve); unsterilized and sterilized intervention in foreign exchange; lending through the discount window; and, in some circumstances, may include the use of options.

...8.1 Money RainsMoney rains are a clean way to study theoretically the effects of increases in the supply of money. In practice, it seems a bit difficult to envision how the Federal Reserve could literally implement a money rain, that is give money away either through directly disbursing currency to the public or by disbursing it through the banking system....

9 Conclusion...When the nominal Treasury bill rate is at zero, the Federal Reserve could attempt to provide a stimulus to aggregate demand through effects in addition to those from increases in the monetary base. The Federal Reserve could purchase assets other than Treasury bills, such as U.S. Treasury bonds or foreign government debt. Even if these assets are perfect substitutes for U.S. Treasury bills, purchases of them could have a stronger stimulative impact than purchases of Treasury bills because of signalling effects."...

and:

...To which we can only say Amen.Another paper, this one from the Dallas Fed, addresses the same issues with a distinctly different tone, e.g.

...Bold, but impractical–eliminating the bound altogetherThe most daring suggestion for escaping the zero-interest-rate trap is one that eliminates the zero lower bound altogether. How can this be done? As noted in the first part of the presentation, the zero bound on interest rates exists because money pays a sure nominal interest rate of zero. No one would be willing to hold any asset that pays a negative nominal rate, as long as zero-interest money is available as a store of value. The strategy for eliminating the zero bound, therefore, is to make money pay a negative nominal interest rate, by imposing some type of ‘carry tax’ on currency and deposits....

Also from that post:

...Finally. from a speech to the National Economists Club by Ben S. Bernanke, Nov. 21, 2002

8. Keynes, however, once semi-seriously proposed, as an anti-deflationary measure, that the government fill bottles with currency and bury them in mine shafts to be dug up by the public...

See! The Fed has lots of ammo left!Here's the headline story from Bloomberg:

The Federal Reserve left the benchmark interest rate as low as zero, said it’s prepared to purchase Treasury securities to resuscitate lending and warned inflation may recede too quickly.

The Fed is ready to buy “longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets,” the Federal Open Market Committee said in a statement today in Washington. Any purchases before the FOMC’s next meeting in March would still need a vote to authorize the action.

Chairman Ben S. Bernanke, by making emergency credit programs rather than rates the focus of policy, is quelling some of the panic in markets while failing to revive growth. Falling home prices, rising unemployment and more than $1 trillion in losses and writedowns at global financial institutions are deepening the longest recession since the 1980s....MORE

A message board poster has put this hilarious chart showing that S&P 500 could be in for a rough ride. He writes that "The very rare black swan formation - note both feet and neck are complete and the rare vampire tooth variation is in place. This is very bad. Very very bad."...

Wednesday, January 28, 2009

Name consultants generally rank fairly low on the utilitarian/work-is-noble scale. They are more useful than coal scuttlers in the public mind, but way below tree root remover, corn dog coater and people that paint themselves silver and pretend to be statues.

But Imara, the lithium ion battery manufacturer that used to be known as LiON Cells, has unearthed evidence that they actually work. When the company wanted to rename itself, it held a contest. Employees, the public relations firm and others submitted 320 names, said CEO Jeff Depew. A ringer, a branding consultant, also submitted names.

The list was winnowed down to ten. Eight of the ten were from the naming consultant, including the name. Imara is Swahili for power, strength and endurance, three of the qualities the company claims its batteries can provide....MORE

Using the Random team name generator/Random team name selector (and ignoring the first two suggestions "Cow Tipping Dwarfs" and "Fudge Dragon Express"*) Wall Street Enforcers popped up.You could also go with the individual wrestling name generator, which for "Journal" kicked back "Professor Jackhammer"(or the female version)First, from the MarketBeat half of the Enforcers duo:

Oil’s Contango Rebound

Another unexpected surge in crude-oil inventories has the price of the front-month oil contract falling while buying continues to occur in later-dated contracts, contributing to a reversal of a trend that dominated energy trading last week.

The Energy Information Administration reported a build of 6.2 million barrels in crude for the week ending Jan. 23, surpassing the expectations for a build of about two to three million barrels. This follows a 6.1 million-barrel build the previous week, and puts crude stocks at 338.9 million barrels, or nearly 16% above a year ago, the largest year-over-year surplus since July of 1990.

The market, for a time, was taking this in stride. Oil moved higher briefly on news of a surprise draw-down in gasoline inventories, but of late, oil was sinking again. March futures were down 40 cents to $41.18 a barrel. In the meantime, investors are bidding up later-dated contracts, increasing the spread between those contracts and the front-month March contract. This situation is known as contango, and reflects expectations for weak demand for the time being....MORE

Next, coming in off the top rope, Environmental Enforcer:

Oil Prices: Have They Bottomed Out? A Hint on the Seas

Have oil prices finally found a bottom?

For the third week in a row, U.S. crude oil stocks rose a lot more than expected. Government figures showed U.S. inventories rose 6.2 million barrels last week, far more than expectations of a rise between 2.9 million and 3.4 million barrels.

But unlike the last two weeks, the oil market didn’t implode. Crude futures actually rose slightly, trading above $42 a barrel in New York. Some traders chalked that up to a suprising reduction in gasoline stocks, a hint that demand destruction may have run its course in the U.S.

For some analysts, there are signs that the oil-price decline, which has shaved more than $100 a barrel off crude prices since July, is finally bottoming out....MORE

An Australian look at the European confection with a lesson for American policy:Cap and 100% rebate of proceeds.

From the Business Spectator:

The European carbon market – the largest in the world by some considerable margin – is having its second price meltdown in three years as European industries find themselves once again with more carbon credits than they need.

The cause this time is not just blatant over-allocation – as it was in 2006 – but the biting effects of the economic downturn, which is reducing manufacturing output by up to 14-15 per cent in some areas.

This is having the perverse effect of delivering yet another windfall to those parts of European industry that receive free permits.

According to market analysts, these industries have been selling excess credits at the rate of some €150 million per week over the last two months. Some in the EU might like to think the companies are reinvesting these windfalls into clean energy or energy efficiency projects, but that seems unlikely in the current market....MORE

CBO reports the time path of estimated outlays on government purchases under the proposed stimulus bill.

Assuming enactment in mid-February, CBO estimates that the bill would increase outlays by $93 billion during the remaining several months of fiscal year 2009, by $225 billion in fiscal year 2010 (which begins on October 1), by $159 billion in 2011, and by a total of $604 billion over the 2009-2019 period.

Edwards’s “Global Strategy” report is sub-titled “Technicals say it is time to bail out. Cut exposure and prepare for rout. US depression looking likely. China’s 2009 implosion could get ugly.” The executive summary below provides the gist of his thinking.

“After increasing our equity exposure at the end of October we believe that the market is set to quickly slide sharply towards our 500 target for the S&P. While economic data in developed economies increasingly reflects depression rather than a deep recession, the real surprise in 2009 may lie elsewhere. It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the Yuan. A subsequent trade war could see a re-run of the Great Depression....MORE

Usually I am optimistic but there are so many ways for the politicians to screw up the mess from what Wall Street screwed up that four consecutive quarters of 10% year-over-year GDP decline is not out of the question, a couple years down the road.

George Soros just wrapped up his presentation at Davos, where he said that the current crisis has the potential to be worse than the 30s and that the banking system still needs $1.5 trillion to be rescued. How will government come up with this cash? Money creation. In other words, some degree of significant inflation is the price to pay to prevent a total banking system collapse.

It sounds like Soros is in favor of the gigantic good bank/bad bank model that's been floated, and he noted that he personally would prefer to invest in the good bank. Really.

Banks don't have enough capital to fix their problems, which means the Obama administration may need a lot more money to clean up the financial mess.

The cost of the bank bailout is likely to be much higher than $700 billion.

While the Obama administration hasn't asked Congress for more money yet, some experts warn that government spending on support for struggling financial services companies will ultimately reach into the trillions of dollars.

The first half of the controversial $700 billion program to help banks has already been spent -- mostly on buying up preferred shares of troubled banks.

Part of the remaining $350 billion may be used to purchase troubled assets from bank balance sheets and place them in what Federal Deposit Insurance Corp. chief Sheila Bair has dubbed an "aggregator bank."

And while taxpayers will surely recover some of that sum eventually, more money is likely to be needed in order for the bank rescue to work.

"The amount of working capital you'd expect the government to take into this would be around $3 trillion to $4 trillion," said Simon Johnson, a senior fellow at the Peterson Institute for International Economics and author of its Baseline Scenario financial crisis blog.

Johnson, who until last year was the chief economist at the International Monetary Fund, said that banks will need more rounds of capital from the government because their cushion against losses is too thin. He also said that there is a need to get rid of some of the toxic assets weighing on financial institutions before they can recover.

With that in mind, he thinks that the net cost to U.S. taxpayers for a broadened bailout would be about $1 trillion to $2 trillion, or between 5% and 10% of U.S. gross domestic product....MORE

Tuesday, January 27, 2009

No matter who builds the networks, if broadband is part of the economic stimulus package, big suppliers win....MORE

At our second link, Katie Fehrenbacher points out the potentially huge implications/applications for CSCO's new software.From earth2tech:

Cisco, the largest maker of Internet infrastructure, could one day be managing the energy consumption of your PC or the building you’re working in. On Tuesday, Cisco plans to launch its “EnergyWise” software, a smart energy upgrade for its switch hardware (infrastructure that routes data on the Internet). But beyond managing the energy consumption of Internet hardware more efficiently, the software will eventually be able to manage the energy of end-user devices like computers and IP phones, as well as automated energy systems in buildings.

Moving to the edge of the network is an unusual move for Cisco, and in particular providing software that can manage third-party devices, as well as lighting and heating and cooling systems in buildings. But that move won’t happen all at once. Cisco is launching the first phase of its software, just for switches, on Tuesday and over the next few months will add in capability to control devices at the edge of the network. Eventually Cisco’s software could help companies manage a system that, say, turns on lights and heating and cooling for an employee when s/he swipes a badge at the office front door....MORE

THE third-world status of Britain’s pensioners was revealed yesterday when it emerged that Iceland is sending clothes to help them keep warm.

The plight of those who cannot afford to heat their homes as temperatures plunge has so touched the hearts of Icelanders that they responded in their thousands to a plea for help.

A 20ft container filled with woollen jumpers, socks and blankets will arrive at Grimsby on Monday following an appeal on an Icelandic radio show.

The appeal was started by the show’s presenters, Heimir Karlsson and Kolbrun Bjornsdottir.

They featured a Daily Express story warning that up to one in 12 UK pensioners could die this winter because of the cold weather.

Neil Duncan-Jordan, of the National Pensioners Convention, said yesterday: “This is a fantastic and generous act of compassion from the people of Iceland, particularly at a time when their own economic situation is extremely difficult.

“But it is also a shocking indictment of the UK Government’s complete inability to tackle properly the problem of winter deaths amongst older people.”>>>MORE

With SunPower (SPWRA) set to report earnings on Thursday after the close, solar analysts have taken a fresh look at the company this morning - and at least three of them did not like what they saw. Analysts at Friedman Billings Ramsey, Thomas Weisel Partners and Pacific Crest all had words of warning this morning for investors in the stock, sharply reducing their forecasts for 2009. Here are the details:

Mehdi Hosseini, Friedman Billings: Hoseini repeated his Market Perform rating on the stock, but cut estimates: he slashes his 2009 view to $2.06 a share, from $3.02. For 2010, he goes to $3.05, from $3.40. Hosseini says the cuts reflect his view that 2009 will bring slower-than-expected demand in both Italy and the U.S. He also thinks ASPs will come under pressure, offsetting the impact of cost-cutting and pressuring gross margin. He also sees further trouble ahead in Spain, noting that some systems and modules have actually been shipped out of Spain and into other geographies....MORE

The worst economic turmoil since the Great Depression is not a natural phenomenon but a man-made disaster in which we all played a part. In the second part of a week-long series looking behind the slump, Guardian City editor Julia Finch picks out the individuals who have led us into the current crisis

Alan Greenspan, chairman of US Federal Reserve 1987- 2006Only a couple of years ago the long-serving chairman of the Fed, a committed free marketeer who had steered the US economy through crises ranging from the 1987 stockmarket collapse through to the aftermath of the 9/11 attacks, was lauded with star status, named the "oracle" and "the maestro". Now he is viewed as one of those most culpable for the crisis. He is blamed for allowing the housing bubble to develop as a result of his low interest rates and lack of regulation in mortgage lending. He backed sub-prime lending and urged homebuyers to swap fixed-rate mortgages for variable rate deals, which left borrowers unable to pay when interest rates rose.

For many years, Greenspan also defended the booming derivatives business, which barely existed when he took over the Fed, but which mushroomed from $100tn in 2002 to more than $500tn five years later.

Billionaires George Soros and Warren Buffett might have been extremely worried about these complex products - Soros avoided them because he didn't "really understand how they work" and Buffett famously described them as "financial weapons of mass destruction" - but Greenspan did all he could to protect the market from what he believed was unnecessary regulation. In 2003 he told the Senate banking committee: "Derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so".

He has described the current financial crisis as "the type ... that comes along only once in a century" and last autumn said the fact that the banks had played fast and loose with shareholders' equity had left him "in a state of shocked disbelief".

Rounding out the top ten:

Mervyn King, governor of the Bank of England

Bill Clinton, former US president

Gordon Brown, prime minister

George W Bush, former US president

Senator Phil Gramm

Abby Cohen, Goldman Sachs chief US strategist

Kathleen Corbet, former CEO, Standard & Poor's

"Hank" Greenberg, AIG insurance group

Andy Hornby, former HBOS boss

Go here for the rest of the list and the reason each of these malefactors is on it.HT: Dealscape